Investors with an interest in Banks - Midwest stocks have likely encountered both UMB Financial (UMBF) and Commerce Bancshares (CBSH). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, UMB Financial is sporting a Zacks Rank of #2 (Buy), while Commerce Bancshares has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that UMBF likely has seen a stronger improvement to its earnings outlook than CBSH has recently. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
UMBF currently has a forward P/E ratio of 10.77, while CBSH has a forward P/E of 13.17. We also note that UMBF has a PEG ratio of 0.93. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CBSH currently has a PEG ratio of 2.70.
Another notable valuation metric for UMBF is its P/B ratio of 1.32. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CBSH has a P/B of 1.9.
These are just a few of the metrics contributing to UMBF's Value grade of A and CBSH's Value grade of C.
UMBF stands above CBSH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that UMBF is the superior value option right now.
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UMB Financial Corporation (UMBF): Free Stock Analysis Report Commerce Bancshares, Inc. (CBSH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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